Land Deals Function as Abusive Tax Shelters, Senate Finance Says

Promoters of tax-advantaged land deals gamed the law to provide billions in inflated deductions to investors, a bipartisan Senate Finance investigation concluded.

The Finance panel, led by Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.), spent more than 16 months probing a class of transactions known as syndicated conservation easements.

• The deals, which the IRS flagged as potentially abusive in 2016, involve promoters who solicit multiple investors to buy interests in a property, which is then donated for conservation purposes, triggering a deduction under tax code Section 170(h).
• The Finance panel, in a report released Tuesday, said the deals they examined appeared to be tax shelters.
• Promoters told investors “that for every dollar the taxpayer-investors paid to the promoters, they would save two dollars on their taxes,” the report said.
• The report warned that syndicated transactions in their current form would reduce government revenue by billions while undermining the notion that the U.S. tax laws apply equally to all.
• NOTE: The IRS recently announced a settlement initiative to resolve easement cases pending before the U.S. Tax Court. The Justice Department is suing Ecovest Capital Inc., one of the biggest sponsors of these deals, and others that allegedly promoted conservation schemes with billions in inflated deductions.